LGO Energy is today pleased to announce that its wholly owned subsidiary, Goudron E&P Limited, has now drawn an initial US$11.78 million from the US$25 million pre-paid oil swap facility agreement with BNP Paribas to fully fund the planned 2015 development drilling programme in the company's Goudron Field in Trinidad.
This funding will be targeted at significantly increasing oil production this year with the drilling of at least seven new development wells at Goudron, as a follow on from last year's successful eight well drilling program, and also to upgrade the field's oil handling infrastructure which is needed to meet anticipated sales capacity through the second half of 2015.
Neil Ritson, LGO's Chief Executive, commented: "We are now entering one of the most exciting growth phases of the Company and are delighted that this finance facility is now in place and that our development programme at Goudron will be carried out through a long term funding arrangement with a first class lending institution. As our business grows in Trinidad we look forward to the relationship with BNP Paribas growing to match our needs."
Goudron Field update
In related news LGO confirms that the construction of Pad 4, from which wells GY-672, 673 and 674 will be drilled to C-sand targets, is now well advanced and the mobilisation of Well Services Rig-70 will be confirmed once the site preparations are complete. It is intended to drill all three wells prior to completing them for production. The rig will then subsequently be moved to Pad 5 to drill four additional C-sand wells. As stated previously all seven wells are fully funded by the BNP Paribas facility.
The first well to be drilled in this year's seven well program, GY-672, is planned to be drilled as a deviated borehole 550 ft south-east from the surface location to a total measured depth of 3552 ft. The same successful three casing design that was used in the later wells of the eight well 2014 programme will be deployed to ensure that the C-sand reservoir is intersected with mud weights that are as close to formation pressure as possible. The top of the Gros Morne reservoir target is estimated to be at 2270 ft drilled depth (2100 ft subsea).
The lease area custody transfer meter (‘LACT’) has been selected and the procurement process is ongoing. The meter is expected to be installed in time to handle increased production from the 2015 drilling campaign. Additional tankage and other modifications, including the expansion of the field export pipeline from 2 7/8 in. to a new 4 1/2 in. OD line, are also planned to be complete as needed to meet anticipated export sales capacity through the remainder of 2015. The Petroleum Company of Trinidad and Tobago (Petrotrin) have advised that they expect to complete the installation of the upgraded 2800 ft long new export pipeline by end March.
Updating the field development plan
With long-term funding now secured, the company has concluded that it is appropriate to update the Goudron field development plan (FDP) and extend the Competent Persons Report (CPR) scope to include the longer-term programme funded by the BNP Paribas facility. The new FDP is being prepared in collaboration with Senergy UK Limited, fully incorporating recent well results, and will form the basis of the new CPR, replacing the previous field development plan used by Challenge Energy Limited in its June 2012 CPR. The new FDP will not influence the placing of the next seven wells, however, it will markedly improve the estimation of reserves over the remaining life of the field. Preliminary estimates indicate the CPR report will now be issued in mid 2015.
BNP Paribas oil-swap agreement
As previously announced, the initial drawdown has a 30 month repayment period with an immediate 6 month repayment holiday. Subsequent funds from the balance of the US$25 million facility will, as and when approved, be available to fund further wells in the 30 well primary development programme already approved for Goudron.
The BNP Paribas facility is a pre-paid oil production swap and has been structured to allow repayment via future sales of oil. Under the facility the company has sold forward approximately 250 000 bbls of crude oil indexed to the price of West Texas Intermediate (WTI). The forward-sold barrels represent approximately 15% of forecast sales from Goudron over the 30 months duration of the agreement.
Repayments are linked to the WTI oil price which provides a hedge to price falls, whilst increases in payments are capped at an average price of approximately US$80/bbl such that the loan repayments have a ceiling and will not increase beyond this point should oil prices rise.
The company has no other outstanding debt, having repaid the previous short-term facility from YA Global Master SPV Limited in full. The loan facility announced with Meridian SEZC in May 2013 was never drawn and has been terminated.
Adapted from press release by Cecilia Rehn